Today the big news is about money and oil. Forward crude oil rose 6% breaking the downtrend. The Swiss central bank (CB) ended its attempt to stop the franc from rising above 1.20 against the euro (to protect its export markets for chocolate, Swatches, and banking services.)
The unpegged Swiss franc then proceded to rise as much as 40% above the euro interday. The euro hit a record low. Swiss bond yields turned negative across the board, meaning you pay to hold Swissie paper rather than getting a return. For Swiss holders, gold fell by 23%. For others it boomed.
And, oh, the US dollar lost as much as 14% interday in London trading. The move makes it almost certain the the Mario Draghi ECB quantitative easing program will be launched Jan. 26, after yesterday’s EU judiciary ruling against German objections. (Finland is still quarreling but nobody pays attention to Finns.)
Our advertiser, Adrian Ash of www.bullionvault.com [1] called the news “violet Thursday†(after the color of the SwFr1000 note). He also called the currency upheaval “Soros in reverse.†In 1992, Hungarian-born American speculator George Soros bet around $1.5 bn that the pound sterling could not be kept aligned with the exchange rate mechanism of the Eurozone (the predecessor to the euro.) He bet it would fall because of weakness in the British economy and made a fortune as the Bank of England desperately defended sterling with ever-higher interest rates. But the market won, as it did again today against the Swissie. (Adrian writes about money. If you want to buy physical gold cheaply and legally, visit our site to click through to www.bullionvault.com/ Like the main US gold exchange-traded fund, it is sponsored by the World Gold Council, a miner grouping aiming to get more investors to buy gold. It is highly respectable with security and low trading margins, unlike other outfits in the precious metals arena. And it’s British.)
A bit overwhelmed by the Swiss, Abhimanyu Sisodia reports:
The Indian CB surprised the markets yesterday with a 25 basis point cut in the repo rate at which it lends money to commercial banks. As a result banks have started lowering loan interest rates. The World Bank economists released a forecast for 2015 predicting that Indian growth will catch up with China’s in 2016-7. Indian growth in the next fiscal year (starting April 1) is expected to hit 6.5%. The Sensex (stock market index) had its best single-day performance since May 2009. The rupee gained 46 paise (rupee cents) against the US$.
The richest Chinese investor of them all is Guo Guangchang who runs Fosun International, buyer of foreign assets. Fosun doesn’t buy positions, but control of companies. Guo’s alleged model is Warren Buffett.
Guo’s recent purchases include Club Med, the French prepaid holiday camp operator; St John, a US fashion house for ladies who lunch; posh Italian menswear group Caruso; Israel’s Alma Lasers (for beauty treatments); Saladax, a biomed firm; and the building where my mother used to work, 1 Chase Manhattan Plaza, the former executive offices of the bank later merged with JP Morgan. Morgan had a venerable pile on Wall Street whereas the Chase skyscraper, built in the 1950s, had became redundant.
I am upset that Mr. Guo changed the name of the building to 28 Liberty Plaza. The number is lucky in Chinese as 8 sounds like “wealth†and 28 is “double wealth.†Liberty harkens to the Statue in NY Harbor which can clearly be seen from the higher floors where David Rockefeller (and my mom) worked. I am not sure what China thinks about liberty. As an immigrant from Nazi Germany my mom was firmly in favor of it.
Another Buffett note: Bill Ackman told Bloomberg TV yesterday morning that he considered following the Oracle of Omaha into ownership of shares of British supermarket chain Tesco. Ackman founded and runs top-performing Pershing Square Capital, a hedge fund. He said he had not discussed his idea with Buffett. But he dropped the idea thinking back on his difficulties with retail in the past, when he put money into JC Penney.
